Death of commercial tenant help please

[Julian Thompson]

We just had a commercial tenant die. They are not a limited company, but there is 3 years left to run on the lease.

Does their estate remain liable? What if the children don’t want to continue running the shop?

Any guidance gratefully received.

[Simpo Two]

My hunch is that just as a Smith & Wesson beats four aces, death beats a contract. But hopefully an expert will be along later.

[surveyor]

I believe that legally it will pass to the estate, unless something is written into the lease to extinguish the lease.

Practically it depends on whether the estate has the funds, experience and ability to run the business, whether the business has any value as a going concern, and your morals as a landlord.

Essentially it's going to be sensitive, and I suppose needs a not easy to have early conversation with the nearest and dearest.

[Simpo Two]

surveyor said:

Practically it depends on whether the estate has the funds, experience and ability to run the business, whether the business has any value as a going concern, and your morals as a landlord.

I think it would be best to ask them if they wish to continue, and if not, to waive any T&Cs and re-advertise. That way at least you get a tenant who wants to run the shop, as opposed to an absentee new tenant who doesn't.

[surveyor]

Simpo Two said:

surveyor said:

Practically it depends on whether the estate has the funds, experience and ability to run the business, whether the business has any value as a going concern, and your morals as a landlord.

I think it would be best to ask them if they wish to continue, and if not, to waive any T&Cs and re-advertise. That way at least you get a tenant who wants to run the shop, as opposed to an absentee new tenant who doesn't.

I would agree. Some Landlords are unpleasant though. Just depends..

[Chrisgr31]

The sensible think would be to speak to the family. Did the tenant employ staff? What is the property selling?

If there were staff I would suggest to the family that the staff are asked to continue on working whilst they consider a longer term plan. Any staff will probably be owed money and even if there is a plan to sell the business it will be better sold as a going concern. If the shop is going to be closed down it will have been better to have sold as much stuff as possible at full price.

On the legal side of the lease I suspect that the lease might be extinguished on the death of the tenant, I think its unlikely it passes on to the estate, but I am not a lawyer. So I would get legal advice and draft up a licence for the family to remain in short term occupation if appropriate.

Personally I suspect the family would welcome a word with the landlord and some constructive help so I would try to be as helpful as possible.

[Julian Thompson]

Thanks for these thoughts - reading them there isn’t consensus amongst us that the lease will pass as a liability into the deceased estate. That’s the first thing I need to be clear on.

It would seem that the children don’t wish to continue with the business, because it transpires that they telephoned one of our staff (who works in an unrelated business but who’s partner might have been in a position to take over the business in question having worked for that business before) to offer the opportunity to take over the lease with the sweetener of all the fixtures and fittings for free - just before the passing of the deceased.

The question of morals is of course the other difficulty. I believe there is just over £20k left to run on the lease. I believe there is some equity in a property. Unfortunately I don’t think the children see eye to eye, and so having discussion with them as a collective won’t be easy.

[marky1]

Surely if the guy has died and the family don’t want his business you have to just tear up the lease and move on to renting to another tenant? What are you trying to do otherwise, squeeze a dead guys estate for equity in a property he had? Doesn’t seem right to me.

[The Moose]

marky1 said:

Surely if the guy has died and the family don’t want his business you have to just tear up the lease and move on to renting to another tenant? What are you trying to do otherwise, squeeze a dead guys estate for equity in a property he had? Doesn’t seem right to me.

I think you’re being a bit harsh there.

Commercial properties do not rent as easily as quickly as residential. The turn around is usually longer. The OP good well have a mortgage that needs paying and if not, a return that needs earning. The market rate for that location may have been down. Why should the OP and less than what was agreed?

I suspect the answer may lie in the lease, but if not, I’d expect his estate to be liable. What I would do, is to advertise the property for rent immediately to try to mitigate your losses. You will probably need some compromise agreement from the estate.

Who’s dealing with probate?

[Mandarin VX]

This should be detailed in the lease contract - if not then I suspect neither side have any legal or contractual obligations and you just need to "work it out".

[williaa68]

First I would suggest that you check the terms of the lease as it may not continue past death but if it is silent on the point then the liability for continuing rent is a liability for the estate. That doesn't mean you can just claim three years rent (you have a duty to mitigate your loss for example) but it is a good starting point for negotiation. If they want to surrender the lease, try and agree something reasonable to all parties. Is there an underlying business that they may wish to sell, for example? If so they will need to assign the lease (or more likely agree a surrender and a new lease with the new owner) as part of the business transfer. Did you use a surveyor when agreeing the lease - if so, they should be up to date on the terms and the current market rent etc. Good luck.

[marky1]

I still can’t see how a lease to an individual that has died can carry on after death. Just doesn’t make any sense to me.

[The Moose]

marky1 said:

I still can’t see how a lease to an individual that has died can carry on after death. Just doesn’t make any sense to me.

It’s a liability. Just like a car loan or a mortgage.